News editor, foreign desk

The Australian dollar is likely to slip further on continuing doubts around China’s growth, currency analysts say.

The Australian dollar fell to a two-month low of $US1.0336 overnight on signs of weaker growth in China and improvement in the US economy.

The dollar recovered some of its losses today to close locally at $US1.0387, but analysts said the slide may continue, sending the dollar to as low as $US1.02 next week.

"The trend has been an aggressive move lower and certainly there is pressure on the downside," said Western Union Business Solutions head of client management Paul Kammel.

"With conditions easing in Europe as well, it suggests maybe the US dollar is the currency of choice in the near-term," he said. The Aussie typically weakens as the US dollar rises.

The latest fall began Thursday afternoon after HSBC's preliminary Purchasing Managers Index for China dipped to 48.1 from 49.6 in February. Any reading below 50 indicating a contraction. It was the fifth consecutive month of declines.

Mr Kammel predicts the dollar could hit $US1.02 next week. As recently as February 29, one Aussie dollar bought $US1.08.

So far the dollar is already down about 1.2 per cent this week against the greenback. If it continues, the loss would make it three consecutive weeks of losses for the Australian dollar – the longest losing streak since the end of November.

Sydney-based FOREX.com research analyst Chris Tedder agreed that further falls in the Australian dollar were possible.

"The Aussie is linked to Beijing through Australia’s reliance on China for commodity demand," he said.

"The mining sector is currently the main driver of economic growth in Australia, thus any fear of a slowdown in China has ramifications throughout the economy."

He said the Aussie was poised for further possible declines if traders continued to invest in the US dollar on the back of better than expected economic data from the US, he said.

"Also, a sustained slowdown in China may continue to weigh on demand for Australian commodities going forward, and in turn drive the Aussie lower," he said.